Wealth gap between whites, minorities widening

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WASHINGTON — Millions of Americans suffered a loss of wealth during the recession and the sluggish recovery that followed. But the last half-decade has proved far worse for black and Hispanic families than for white families, starkly widening the already large gulf in wealth between white Americans and most minorities, according to a study from the Urban Institute.

‘‘It was already dismal,’’ Darrick Hamilton, a professor at the New School in New York, said of the wealth gap between black and white households. ‘‘It got even worse.’’

Given the dynamics of the housing recovery and the rebound in the stock market, the wealth gap might still be growing, experts said, further dimming the prospects for economic advancement for current and future generations of Americans from minority groups.

The study found that the racial wealth gap yawned during the recession, even as the income gap remained stable. As of 2010, white families, on average, earned $2 for every $1 that black and Hispanic families earned, a ratio that has remained roughly constant for 30 years. But when it comes to wealth — as measured by assets, like cash savings, homes, and retirement accounts, minus debts, like mortgages and credit card balances — white families have far outpaced black and Hispanic ones.

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Before the recession, white families were about four times as wealthy as nonwhite families, according to the Urban Institute’s analysis of Federal Reserve data. By 2010, whites were about six times as wealthy.

The dollar value of that gap has grown, as well. By the most recent data, the average white family had about $632,000 in wealth, versus $98,000 for black families and $110,000 for Hispanic families.

‘‘The racial wealth gap is deeply rooted in our society,’’ said Caroline Ratcliffe, one of the authors of the study. ‘‘It’s here, it’s not going away, and we need to care about it.’’

Many experts consider the wealth gap more pernicious than the income gap, as it perpetuates from generation to generation and has a powerful effect on economic security and mobility. Young black people are much less likely than young white people to receive a large sum from their parents or other relatives to pay for college, start a business, or make a down payment on a home. That, in turn, makes their wealth-building prospects shakier as they move into adulthood.

Two major factors helped to widen this wealth gap in recent years. The housing downturn hit black and Hispanic households harder than it hit white households, in aggregate. Many young Hispanic families, for instance, bought homes as the housing bubble was reaching its peak, leaving them saddled with debt as prices plunged.

Black families were hit disproportionately by the housing collapse because housing constituted a higher proportion of their wealth than for white families, leaving them more exposed when the market crashed. Higher unemployment rates and lower incomes left them less able to keep paying off mortgages and more likely to lose their homes, experts said.

Discriminatory lending practices were also a factor. ‘‘We know that communities of color, their rate of subprime or predatory loans was twice what it is in the overall population,’’ said Tom Shapiro, at the Institute on Assets and Social Policy at Brandeis University.

In aggregate, the value of black families’ retirement accounts shrank 35 percent between 2007 and 2010, while white families’ accounts gained 9 percent. With lower earnings and higher unemployment rates to begin with, black families were more likely to take funds out of the market when it was depressed, leaving them out in the cold as it recovered.

‘‘That reservoir of what you can dig into for emergencies and contingencies is a lot shallower in communities of color,’’ Shapiro said. ‘‘That pushes black families to sling off assets, like IRAs or stocks, that you might have had another goal in mind for.’’

Something similar may be happening as the housing recovery takes hold.

‘‘Some people talk about it in terms of a land grab,’’ said Hamilton, as mainly white investors are buying foreclosed homes from disproportionately minority owners. ‘‘As the housing market starts to appreciate, some of those minority buyers might not be back.’’

All in all, Hispanic families lost 44 percent of their wealth between 2007 and 2010, the Urban Institute estimates, and black families lost 31 percent. White families lost 11 percent.

The institute suggests reforming policies that encourage savings but disproportionately benefit the already wealthy and families with high incomes, like the home mortgage interest deduction. Automatic savings vehicles also might help lower-income and lower-wealth families start saving, it said.

Hamilton has proposed ‘‘baby bonds,’’ granting savings accounts to infants, seeded with funds that allocate greater sums to families with less wealth. (Such accounts would be race-blind, Hamilton stressed.) Account holders could tap that money as young adults to pay for college or start a business.

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